April 1, 1998
LEXINGTON SMALLCAP VALUE FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
On March 27, 1998 shareholders of the Fund approved a new
sub-advisory agreement with Market Systems Research Advisors, Inc.
("MSR Advisors"). The name of the Fund has also been changed to
Lexington SmallCap Fund, Inc. Under the sub advisory agreement,
MSR will provide Lexington SmallCap Fund with investment advice
and management of the Fund's investment program.
INVESTMENT OBJECTIVES AND POLICIES
The third paragraph describing the Lexington SmallCap Fund's
investment policy found on page 26 of the Prospectus has been
replaced by the following: In selecting investments for the Fund,
the Manager and Sub-Adviser have established a universe of small
capitalization stocks that are screened using the Sub-Adviser's
proprietary stock selectivity model. Once the stocks are evaluated
and ranked by expected future relative price performance, the Manager
and Sub-Adviser establish both sector and diversification allocations
in building the portfolio. In addition, the quality of the company
and the risk/reward prospects for each security is reviewed and
analyzed. This approach takes into account both value and growth
stocks rather than being limited to only a value criteria. The
Manager and Sub-Adviser believe that this multi-faceted process will
enhance investment performance and will improve the consistency of
portfolio results over time. The Manager and Sub-Adviser can change
the proportion of the Fund's assets that are invested in particular
companies and industries based on its evaluation of the outlook for
specific industries and companies and the economy.
PORTFOLIO MANAGERS
Robert M. DeMichele is one of three lead managers of a portfolio
management team that manages the Lexington SmallCap Fund. Mr.
DeMichele is Chairman and Chief Executive Officer of Lexington
Management Corporation. He is also the Chairman of the Investment
Strategy Group. In addition, he is President of Lexington Global
Asset Managers, Inc., LMC's parent company. He holds similar offices
in other companies owned by Lexington Global Asset Managers, Inc.,
as well as the Lexington Funds. Prior to joining LMC in 1981, Mr.
DeMichele was a Vice President at A.G. Becker, Inc. the securities
division of Warburg, Paribus, Becker, an international investment
banking firm. From 1973 to 1981, Mr. DeMichele held several
positions, the most recent managing A.G. Becker's Funds Evaluation
and Consulting Group for both the East and West coasts. Mr. DeMichele
is a graduate of Union College with a B.A. Degree in Economics and
an M.B.A. in Finance from Cornell University.
Alan H. Wapnick is one of three lead managers of a portfolio
management team that manages the Lexington SmallCap Fund. Mr. Wapnick
is Senior Vice President, Director of Domestic Investment Equity
Strategy of the Manager. Mr. Wapnick is responsible for domestic
investment analysis and portfolio management at LMC. He has 27 years
investment experience. Prior to joining the Manager in 1986, Mr.
Wapnick was an equity analyst with Merrill Lynch, J.&W. Seligman,
Dean Witter and most recently Union Carbide Corporation. Mr. Wapnick
is a graduate of Dartmouth College and received a Master's Degree in
Business Administration from Columbia University.
Frank A. Peluso is one of three lead managers of a portfolio
management team that manages the Lexington SmallCap Fund. He has
35 years investment experience. Mr. Peluso is President and Chief
Executive Officer of MSR Advisors, the sub-adviser to the Fund.
Mr. Peluso utilizes a proprietary analytical system to identify
securities with performance potential which he believes to be
exceptional. In addition, Mr. Peluso's proprietary data is used
by professional money managers, insurance companies, brokerage
firms, banks, mutual fund companies and pension funds. Mr. Peluso
is a graduate of Princeton University and has completed a year of
post-graduate study at Columbia University, and two years post-
graduate study at Princeton University with a Fellowship in
Mathematical Physics.
